Asia and Eurasia
Eurasian Integration: Progress and Problems

EAEU is an exclusively economic organisation, and it is methodically incorrect to evaluate it differently, since no process can be expected to produce results that it cannot give by definition, fixed by the agreement on the basis of which the EAEU functions, writes Vyacheslav Dodonov, Senior Reseach Fellow, at the Kazakhstan Institute for Strategic Studies under the President of Kazakhstan.

The seven years of the Eurasian Economic Union’s existence provide an opportunity to sum up some results and assess the problems that have arisen during the integration process. The presence of problems prevails in its assessments, but not in the process itself, which has been characterised by steady, although perhaps not overtly noticeable progress. As for the assessments, in many if not most of them, there is scepticism and negativity, often regardless of whether the observers are supporters or opponents of integration. For the supporters, integration is not intensive enough and is too limited by the narrow framework of economic cooperation, and the “alliance” of partners, including in the political sphere, is too weakly expressed. For the detractors, however, cooperation is excessive and, as a result, has led to an encroachment on national sovereignty, and even positive results in the economic sphere are sometimes interpreted in a negative way, since they increase the role in the economy of countries other than those one would like to see as leading partners. Accordingly, on the one hand, two parallel discourses are strengthening: about the stagnation and stalling of Eurasian integration, and on the other hand — about its growing threat to sovereignty and the degradation of multi-vector economic ties.

Global Governance
Eurasian Integration: Stagnation or Laying the Foundation?
What is the current rationale of Eurasian economic integration and what can be done to realise it? This question was posed by Timofei Bordachev, Programme Director of the Valdai Discussion Club, to the participants in the discussion, titled “EAEU: What’s Next?”, which took place on December 14. In his opinion, today we can see a certain stagnation in the integration process, and an era of uncertainty awaits ahead.

Club events

In our opinion, negative assessments of the process of Eurasian integration are due to the fact that expectations do not correspond to its realities and essence, as formulated during the creation of the EAEU and reflected in the regulatory documents, particularly in the Treaty on the Eurasian Economic Union. This essence lies, first of all, in the fact that the key word in the name of the EAEU is “economic”, which also determines the realities of practical integration. The economic nature of the integration association is fully reflected in the Treaty, the preamble of which states that it was signed by parties driven by the “desire to strengthen the economies”. Also, the Treaty clearly defines the main goals of the Union (Article 4) and all of them are economic: stable development of economies; the creation of a single market; modernisation, cooperation and an increase in the competitiveness of economies. The founding document of the EAEU contains no other goals. All sections of the Treaty are also exclusively economic in nature — they are numerous and cover various aspects, but do not include any other areas of integration besides the economy — not political, nor military, nor cultural, nor anything else. The exclusively economic nature of the EAEU, enshrined in its statutory document, is the reality from which one must proceed when assessing the process of Eurasian integration. Regardless of the points of view on this process and the preferences of the commentators, it is an exclusively economic organisation, and it is methodically incorrect to evaluate it differently, since no process can be expected to produce results that it cannot give by definition, fixed by the agreement on the basis of which the EAEU functions.

If we consider the process of Eurasian integration correctly, confining ourselves to its economic aspects and correlating the results with the goals of the EAEU, then the achieved intermediate results are quite positive. It is legitimate to regard the current results as intermediate ones, since a number of integration formats provided for by the Treaty have not yet been created (a common financial market, common markets for gas, oil and oil products, etc.). Some of them are not fully operational. In the same areas where integration formats function mostly in full, the results demonstrate the progress of integration and compliance with the goals of the Treaty.

Thus, we can talk about the achievement of the goal to increase the stability of economies in the context of global turbulence. This, in particular, is demonstrated by the results of 2020, when there was a global crisis that has no analogues in peacetime since the Great Depression: the 2020 decline in annual global GDP by 3.6% was last recorded in 1932. However, the impact of the 2020 crisis on most EAEU countries turned out to be much weaker than during the previous crisis in 2009 — this was reflected both in lower levels of GDP decline and in fewer percentage points relative to the pre-crisis years. In addition, during the 2020 crisis, the EAEU economy suffered less than the world economy (a decrease in GDP by 2.9%, versus 3.6% in the world), while in 2009 the situation was vice versa (a decline of 7.8% versus 1.7% in the world).

Global Governance
Eurasian Integration: Is There Any Reason to Worry?
Timofei Bordachev
It is possible that the countries participating in Eurasian economic integration now consider it more profitable to slow down and achieve greater sustainability, having temporarily sacrificed extensive development, both in terms of areas of cooperation and in the levels of the arrangements implementation, writes Timofei Bordachev, Programme Director of the Valdai Club.
Expert Opinions

The goal of enhancing trade and its balance, including the formation of a common market, has also demonstrated progress in implementation — the sphere of mutual trade is developing at a faster pace. Over a six-year period, the volume of mutual trade in the EAEU increased by 20.7%, from 45.6 to 55.1 billion US dollars. This growth significantly exceeded the 7.8% increase in trade with third countries. As the result of an acceleration in the growth of mutual trade within the EAEU, its share in the total volume of foreign trade of the Union countries increased from 7.3% in 2015 to 8.1% in 2020. At the same time, a fact deserves special attention: the export of the EAEU countries to the markets of their association partners has grown at a faster pace, while exports to third countries decreased by 2.4% in 2015-2020. This means that in the face of deteriorating foreign economic conditions, the EAEU market has become a factor stabilising the exports of its participants. Moreover, the better dynamics of exports to this market compared to third countries were typical for all five states. Thus, the volume of exports from Kazakhstan to the EAEU countries in the period under review increased 10.8%, and to third countries — by 2.5%. In Russia, this increase was 18.3% amid a 3.3% decrease to third countries; Belarus saw a 27.3% EAEU export increase and 3.1% export decrease. Kyrgyzstan and Armenia both saw exports to the EAEU grow (by 35.2% and 177.1%, respectively) more than exports to non-EAEU countries (32.3% and 48.8%, respectively). That is, over the six years of the EAEU’s existence, trade among the partners has become more productive than with the rest of the world for all member states without exception, which is evidence of the Union’s benefits.

The same applies to investment cooperation between the EAEU countries, which is also among the goals of the union; the others are the modernisation of the respective economies and the formation of a common capital market. Cooperation in the investment sphere is best characterised by the accumulated foreign investment indicator (in this case, investment from partner countries). Since the beginning of 2015, the volume of accumulated investments from Russia in the EAEU countries and from these countries in Russia has not only grown dynamically, but more intensively than the corresponding indicators as a whole (see the Table).

The higher level of growth of accumulated investments from Russia and in Russia vis-à-vis its Eurasian partners also led to an increase in the share of the EAEU countries in investment cooperation — they account for 0.9% of foreign investments accumulated in Russia (at the beginning of the Union’s functioning, it was 0.4%) and 1.9% of Russian investments accumulated abroad (previously it was 1.8%). At the same time, it is characteristic that all the EAEU countries demonstrated higher growth with respect to the indicator under consideration — the only exception was the presence of Russian money in Armenia, which has decreased over this time.

In general, the positive dynamics of economic cooperation indicators is also demonstrated by other areas in which the effects of Eurasian integration have manifested — joint ventures, cross-border transfers, etc. Over the past three years, the number of obstacles in the internal market of the EAEU has significantly decreased — from 71 at the beginning of 2019 to 50 at the end of 2021, which was an all-time low. However, the achieved progress does not mean that the integration process is problem-free. There are problems not only with a different character, but also with a significantly different potential to influence integration processes. In our opinion, the following types of these problems can be distinguished:

  • local/technical problems are related to the non-fulfilment of EAEU norms, their arbitrary interpretation, decision-making delays on the implementation of the regulatory framework of the Union at the level of regions/industries/main link, etc.; these problems have a high potential for their resolution, the only question is time;

  • problems of distortion of economic cooperation processes by non-economic factors — from excessive use of phytosanitary and other non-tariff restrictions on the admission of products from partner countries to a formally single market, to foreign policy factors that impede economic relations with third countries; these problems will obviously arise from time to time, but will be gradually resolved, although not without difficulty;

  • systemic problems associated with the limits of integration reaching in certain particularly sensitive areas, after which the resistance of national interests (business, population, state — depending on the situation) becomes too strong and cannot be overcome as part of the routine process of economic integration. In this case, we are talking about situations where supranational institutions overcoming national-level interests is practically impossible and the only constructive solution is a compromise in favour of national interests, where the controversial issue is removed from the supranational regulatory framework as the exclusive prerogative of a sovereign state.

All these problems, from technical to systemic, however, don’t represent insurmountable obstacles to the development of integration processes. They can, however, slow them down, sometimes cause a negative reaction, and ultimately form a kind of gap in the total array of the integrated economic space, which, nevertheless, will gradually expand, with greater or lesser intensity. However, there is also a problem of the last, higher order, which consists in the fact that there are limits to economic integration, after which further progress will become impossible. After the completion of the formation of the regulatory system, logistics infrastructure and the creation of functioning common markets, the progress of integration will come to its natural conclusion, and the indicators reflecting this process will stop showing growth and reach a plateau. This moment, in the case of Eurasian integration, will not happen soon, but it will come, after which the question of its further evolution will arise. Although there will still be room to expand economic integration by bringing in new members, it will no longer be possible to deepen it. At this moment, new, more significant risks will arise that can call into question all previous achievements. There are risks associated with the transfer of the integration process from the economic sphere to others. The implementation of such a scenario, the experience of which is demonstrated by European integration (which began as a purely economic one), can become a very serious challenge for the EAEU or the organisation which will eventually follow it. However, this bifurcation point is still far away, and in the next decade progress in the development of Eurasian integration will obviously prevail over its problematic nature, as has been confirmed by the experience of the past seven years.
Global Governance
EAEU - Quo Vadis?
Kubatbek Rakhimov
A certain disillusionment with the Eurasian agenda should not automatically lead to an involution scenario, but it is necessary to change the centre of gravity in the very system of multifaceted Eurasian integration, which should not narrow to only economic interaction, writes Kubatbek Rakhimov, former adviser to the Prime Minister of the Kyrgyz Republic, PHD in economics, MBA.
Expert Opinions
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.